http://news.yahoo.com/s/nm/20070523/tc_nm/xm_sirius_dc_1;_ylt=Aj8X9txfNwyP9cWt.FqeSBkE1vAI

Reuters is reporting that Sen. Herb Kohl (D-WI) has come out on record as opposing the XM-Sirius merger.  As we’ve said before, Congress does NOT have a direct role to play in the merger decision, but that regulators who do have a role will take the input from those who control their funding very seriously.  Senator Kohl is the chairman of the Senate’s anti-trust subcommittee, and works closely with the DoJ anti-trust division.

For Mel and the merger team, this is clearly bad news.  On the good news front the marketing department ought to take some of Sen. Kohl’s words for their advertising.  Terrestrial radio is too limited to compete with satellite radio, while personal audio players can not match the programming of satellite service, he wrote.

“No other technology available today is a substitute for the satellite radio,” Kohl wrote.

Heck, we’ve been saying that for years!!  As much we all of us here would tend to agree with the Senator on these points, we also need to recognize that millions of consumers disagree and find their terrestrial radio stations and personal music players not only competitive, but superior.

Orbitcast is reporting that XM “shock jocks” Opie and Anthony will immediately start serving a 30-day suspension. Apparently there were comments made on yesterday’s program that indicated to XM management that their earlier apology was insincere (as many commenters here pointed out at the time).

The XM statement is here

More details as they become available…

Update 3:50pm ET: Orbitcast has a second post that includes the offending audio.

Update 5/16: Although I first found this report at Orbitcast, I have to give credit where it it is due, and recognize Ryan at XMFan for being first to break this story early yesterday morning.

Mel Karmazin is back in Washington again today to testify about the proposed Sirius-XM merger. The House Subcommittee on Telecommunications and the Internet will be hearing testimony from Karmazin and others today at 2:30pm. The “The Digital Future of the United States: Part II– The Future of Radio” hearing also includes testimony from Peter Smyth of Greater Media and Robert Kimball of RealNetworks.

You can watch a live video webcast of this hearing (Windows Media Player is required).

Watch this post for highlights from the hearing as it happens.

The topics that this committee will address may seem broad or boring, but the outcome of this and other House committee hearings will play a key role in the future of the merger between Sirius and XM. Maybe by the time this is all over, the committee members will be able to correctly pronounce Sirius and Karmazin.

Highlights

3:30pm: Opening statements by committee members are still being made. It seems there will be quite a few topics addressed by this committee. Some of the topics addressed include: increasing the cap on the number of stations owned by a licensee in large markets, broadcaster licensees should better reflect the population by including more women and minorities, the sampling of music to create mash-ups should not be held to the same copyright standards as a song-writer that duplicates another artist’s bass line, local radio provides to the markets they serve local content which satellite does not, technology is out pacing pacing laws that are currently in place and has changed they way consumers gain access to information, will the merger of Sirius and XM result in increased costs, less innovation, and other drawbacks found if there is only one player in the satellite radio market?

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Sirius has started a campaign today as a guarantee to customers that current radios will not be obsolete post-merger. The “SIRIUS Guarantee” campaign is “a national print and retail advertising” that should be seen across the country. The wording of the guarantee is worded clearly, “no SIRIUS radios will become obsolete as a result of a merger with XM.” Customers concerns about increased subscription rates were also addressed by stating that your current subscription rates will be honored after the merger.

Following a merger, SIRIUS will be able to offer the best of both services in a mix of programming that can be accessed by existing radios, including such critically acclaimed SIRIUS programming as:

* 100% commercial-free music

* The best sports line-up including the NFL, NASCAR, NBA and college
sports

* Top personalities, such as Howard Stern, with two dedicated full-time
channels, Martha Stewart Living Radio, CosmoRadio, Playboy Radio, and
Blue Collar Comedy channel, among many others

This campaign is similiar to XM’s Customer Promise that was announced this morning. XM’s campaign including a signed open-letter in today’s USA Today. Here are a few key lines from the XM open-letter.

As long as you are an XM subscriber, your XM radio will continue to eceive XM’s great programming. Following the merger, XM expects that theexistingradios will be able to receive a mix of programming from both ervices.

XM’s programming, including Major League aseball, Oprah & Friends, Bob Dylan, Opie & Anthony and commercial-free usicchannelswill not be interrupted by the merger. In the future, we will be able to offer the best of both companies’ programming.

Mel Karmazin is Washington, DC, today to testify at the House Antitrust Task Force Hearing on: “Competition and the Future of Digital Music”. SSG posted the schedule and link to listen to the hearing. Here are the details from the House’s website:

Wednesday 02/28/2007 - 3:00 PM
2141 Rayburn House Building
Full Committee
Hearing on: “Competition and the Future of Digital Music”
Before the Antitrust Task Force, to be established by resolution on the morning of February 28, 2007.

By Direction of the Chairman

Watch after the jump for news that comes from the hearing today.

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While there is no concrete answer, we have found a couple pieces of evidence that Sirius and XM may be able to keep the current radios of today and still offer all of their content to both sides. First, at Select Satellite Radio, the group that is in charge of making a dual-radio in order to ensure the FCC stipulation that they develop one, states this:

“It is acknowledged that SIRIUS, XM and their manufacturing partners already produce receivers that permit end users to access all Satellite Digital Audio Radio systems in compliance with FCC interoperability obligations.”

It appears that this implies radios today can receive the entire satellite digital audio radio services(SDARS, the technical term for satellite radio) spectrum.

Sirius, in their merger Q&A, mentions this:

“Will the radio I have now be compatible with new services?

Your current radio will allow you to enjoy all SIRIUS programming. And in the future you will be able to receive enhanced programming.”

What this means is not clarified, but it could be that you will receive XM programming down the road with your Sirius radio. Both sides seem to be stating that you won’t need a new radio to receive their programming with this so called enhanced programming after the merger takes place.

Furthermore, for the first 6 months or so, XM used the same codec that Sirius does, Perceptual Audio Coder(PAC), before they switched over to AACplus in April, 2002.

So, right now we have two questions that need to be answered:

1) Do XM’s newer radios still decode PAC?

2) If so, does it mesh with the evolved version of PAC that Sirius uses?

If the answer to both is yes, then it looks like there is a strong chance radios will be able to pick up both services down the road. This of course assumes that the merged company broadcasts solely in the PAC codec.

This also lends itself to how this enhanced programming may be setup and what the companies mean by offering tiered programming. Imagine the situation where you have a radio that is capable of receiving programming from the full spectrum. You like more of what “Sirius” is offering, so you sign up with a “Sirius” radio paying your $12.95. However, you really want MLB, Fungus 53, and Air America from “XM”. You can now pay an additional $6.99 as a secondary subscription rate to receive all this and more on the “XM” tier. This is an approximately $6.00 savings for those who already subscribe to both services.

While not stating that the new name will definitely be XM, the way the merger will be structured is that Sirius will spin off a wholly-owned subsidiary, containing all of Sirius’s assets, that will be the entity that is merging with XM Satellite Radio, according to an 8-K just filed. This does buck the trend that it was Sirius that would be the surviving entity. As stated before, this does not mean they have decided on the new company’s name; it could go either way. For example, in 2005 America West Airlines bought US Airways, but retained the US Airways name because it was a stronger national brand. A similar instance could happen here.

For clarification, a wholly owned subsidiary is a company that is owned and controlled by another company. For example, Linksys is a wholly-owned subsidiary of Cisco Systems, and Nabisco is a wholly owned subsidiary of Kraft Foods.

It will also be titled a reorganization for tax purposes, rather than a merger.

As we mentioned earlier with the merger announcement, there will be a conference call today at 8:30 with Mel Karmazin from Sirius and Gary Parsons from XM to discuss the merger. Listen to it live on channel 122 on Sirius, channel 200 on XM, or at investor.sirius.com.

We will use this post to update you throughout the call, similar to how we do it for quarterly conference calls.

You can also feel free to join us in the chat to talk about the conference call, and get information even quicker. To get to the chat, click on ‘chat’ at the top of any page on Sirius Backstage.

Update: They have added an Investor Presentation to the site(pdf format)

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Breaking…http://biz.yahoo.com/prnews/070219/nym038.html?.v=75

The two companies have announced that they are entering into a joint merger agreement worth about $13 billion, including net debt of $1.6 billion. XM shareholders will receive 4.6 shares of Sirius stock for each share they own, which will give them about 50% of the new company. As reported, Mel will stay CEO of the new company, Gary Parsons of XM will become chairman of the new company, and current XM CEO hugh panero will stay until the merger is completed. They will have a Conference Call tomorrow at 8:30a broadcast from both companies’ web pages, as well as Sirius channel 122 and XM channel 200.

They have not yet determined the new company’s name or headquarters yet. They have summarized these benefits:

    * Greater Programming and Content Choices -- The combined company is
      committed to consumer choice, including offering consumers the ability
      to pick and choose the channels and content they want on a more a la
      carte basis. The combined company will also provide consumers with a
      broader selection of content, including a wide range of commercial-free
      music channels, exclusive and non-exclusive  sports coverage, news,
      talk, and entertainment programming.  Together, XM and SIRIUS will be
      able to improve on products such as real-time traffic and rear-seat
      video and introduce new ones such as advanced data services including
      enhanced traffic, weather and infotainment offerings.

    * Accelerated Technological Innovation -- The merger will enable the
      combined company to develop and introduce a wider range of lower cost,
      easy-to-use, and multi-functional devices through efficiencies in chip
      set and radio design and procurement.  Such innovation is essential to
      remaining competitive in the consumer electronics-driven world of audio
      entertainment.

    * Benefits to OEM and Retail Partners -- The combined company will offer
      automakers and retailers the opportunity to provide a broader content
      offering to their customers.  Consumer electronics retailers, including
      Best Buy, Circuit City, RadioShack, Wal-Mart and others, will benefit
      from enhanced product offerings that should allow satellite radio to
      compete more effectively.

    * Enhanced Financial Performance -- This transaction will enhance the
      long-term financial success of satellite radio by allowing the combined
      company to better manage its costs through sales and marketing and
      subscriber acquisition efficiencies, satellite fleet synergies, combined
      R&D and other benefits from economies of scale.  Wall Street equity
      analysts have published estimates of the present value of cost synergies
      ranging from $3 billion to $7 billion.

    * More Competitive Audio Entertainment Provider -- The combination of an
      enhanced programming lineup with improved technology, distribution and
      financials will better position satellite radio to compete for
      consumers' attention and entertainment dollars against a host of
      products and services in the highly competitive and rapidly evolving
      audio entertainment marketplace.  In addition to existing competition
      from free "over-the-air" AM and FM radio as well as iPods and mobile
      phone streaming, satellite radio will face new challenges from the rapid
      growth of HD Radio, Internet radio and next generation wireless
      technologies.

In a NY Post article that was published today, SIRIUS and XM plan to announce the details of their Merger today. The Post has a picture of SIRIUS CEO Mel Karmazin with a caption “Done deal.” The two companies were in negotions during the weekend and through the time the Post article went to press and “the deal could fall apart at any time.”

It would be surprising that the two entities would announce a merger today, given that it is President’s day and the markets are closed. This is also the NY Post, a paper not known for its accurate reporting. Assuming a merger did happen, it would be much more likely to be announced when the market was open, simply because it could make the stock price jump immediately, allowing executives to pocket millions and shareholders to be happy. Announcing it now would give stockholders 24 hours to look it over and find any downsides, potentially making the stock not jump as much or be flat on the news tomorrow.

Another important point to make is that the Post has really stretched the annual savings number: “$7 billion annually”. It is amazing how they could save that much when the two companies expenses combined were barely half of that in 2006(estimate).

Please note: we are not advising people to buy or sell and our speculations are just that. The stocks could go up, down, left, right, front, back, pretty much whatever. We are just another person providing insight.